Question
There are two risky assets, asset 1 and asset 2 on the market, with the following statistics. E(1) = 0.1, 1 = 0.1, E(2)=0.15, 2
There are two risky assets, asset 1 and asset 2 on the market, with the following statistics. E(1) = 0.1, 1 = 0.1, E(2)=0.15, 2 = 0.2, 12 = -0.2. The return on T-bill is 0.05.
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What is the weight in asset 1 for the minimum variance portfolio (MVP) from these two assets? What is the std of this MVP? Show this MVP on the MVF and mark the efficient and inefficient frontier.
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What is the weight in asset 1 for the optimal risky portfolio from these two assets? What is the expected return of this optimal portfolio? Show this portfolio on the MVF, and plot the corresponding CAL.
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